Publication in Russian on the Zen blog
https://dzen.ru/a/ZrTGNEVG8SbebHxy
Can you give me an example of why free markets or free trade are better than any alternative? Think of a pencil. We all know that efficiency in production and resource allocation is what makes free markets good. We know that free trade has a comparative advantage. But to illustrate this in its simplest form, I'll use Milton Friedman's pencil example. In fact, this is why free market capitalism and free trade work for both humanity and consumers. Ultimately, it promotes peace among nations.
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In this publication we will consider capitalism and free trade, is it really so great. Many people think that it is very good, but they cannot formulate and say specifically why. And other people are skeptical. Often people use imprecise economic vocabulary, they cannot formulate why capitalism or free trade can be good. A lot of people, especially in the post-Soviet space, do not even understand the meaning and term of capitalism (free enterprise). In this example, we will borrow an analogy or idea from Milton Friedman, we will consider a simple pencil, this miracle pencil, it does not seem so expensive, you can buy it for next to nothing. But how many people do you think made this pencil? Let's say the eraser for the pencil comes from Vietnam, Malaysia, Burma, Cambodia, and is grown from a rubber tree, thanks to the use of organic or inorganic fertilizers, then a steel object is used to cut down this tree. Then that wood gets put on a ship to the right country, where that wood gets processed. That wood gets cut, it gets shaped, it gets sharpened, it gets combined with brass, then it gets painted, it gets designed, it gets logos, and then the main ingredient for the pencil is graphite, which is also mined in South Africa or South America or China and so on. All of that is integrated into the simple idea of a pencil. And the number of people who were involved in making a pencil is incalculable, it's not one or two thousand people, it's a lot more. So if you extrapolate that, you're going to pay pennies for that pencil, no matter where you buy it, and you're going to have a fantastic writing instrument. And if there wasn't a free market, it would be very difficult for us to make anything. Now think about a desktop computer, that's infinitely more complex than a pencil, or a cell phone. The idea is that we all act in our own self-interest and there are unintended consequences, and life is essentially a positive-sum game. And when we all cooperate in a free market system, life becomes better for all of us, for all of us who contributed to the creation of that pencil, people may have different religions, they may have different political views, but they all contributed to the creation, and that's another benefit of the free market, not the actual physical consumption. The product that we get as consumers or suppliers, or that we produce, it just goes beyond the distributed and productive efficiency of the market and free trade comparative advantage. It's all about people cooperating, the more you trade, the more peace, the more friendship between nations, if you do business with someone, chances are you'll stop hating each other and you'll break down walls, you'll find common ground in the other person, so that's the benefit of free trade under capitalism, trade unlocks the potential of people and the interactions of people around the world, and that's very important. The interactions may be hidden and untapped, but in the creation of this pencil, let alone more complex devices, a host of positive effects on a global scale are revealed, so the next time you hear an argument against capitalism, just think of the pencil. Thank you very much for your time and attention. Good luck.
Милтон Фридман - американский экономист, статистик, преподаватель университета, эссеист, создатель теории монетаризма, нобелевский лауреат.
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Publication in Russian on the Zen blog
https://dzen.ru/a/ZrTGNEVG8SbebHxy
